Lake v. Shumate
| Decision Date | 24 September 1883 |
| Citation | 20 S.C. 23 |
| Parties | LAKE v. SHUMATE. |
| Court | South Carolina Supreme Court |
1. L purchased at public sale a tract of land for M., paid the greater part of the purchase-money, and took titles in his own name, M. giving to L. a note for such his payment, and himself paying the balance, under a verbal agreement that L should convey to M. when this note was paid. Subsequently M being in possession, mortgaged this land to D., which mortgage was duly recorded. L. died and his widow became sole owner of the legal title to the land, and also of M.'s note to her husband, and afterwards, regarding such title as her security, she made a loan to M. of money belonging to a ward of whom she was guardian. Some years later, M. gave to this widow a new note for the balance due to her upon his two notes so held by her, she never having had actual notice of the mortgage to D. In action by the widow to have D.'s mortgage canceled and for other relief, this land was sold. Held , that D.'s mortgage was not entitled to receive any part of the proceeds of sale until after full payment to L.'s widow of the moneys due to her on M.'s consolidated note.
2. The fact that the money lent by the widow belonged to her as guardian, while the original debt was due to her individually, does not affect her rights in the matter.
3. In a contest between M. and L., M. could not demand titles without paying all of his indebtedness to L.; and D., under his mortgage of M.'s interest in the land, can claim only such interest-and that is, what remains after paying to the heir of L. the balance of the purchase-money and all other debts due to her by M.
4. If actual notice of the mortgage to D. was had before other money was lent to M. by L. or his widow, the mortgage would be preferred to such subsequent loans, but neither possession of the premises by M., nor the record of the mortgage, were sufficient to charge the holder of the legal title with notice.
5. Costs in such a case are within the discretion of the Circuit judge.
Before COTHRAN, J., Greenville, November, 1882.
The appeal in this cause came to this court under the title of Mary P. Lake against W. T. Shumate, administrator of J. P Moore, deceased, T. C. Gower, J. N. Greer, W. A. Williams and Samuel J. Douthit, judge of Probate for Greenville county. The action was commenced in the life-time of J. P. Moore, not later than April, 1879. The complaint stated the facts of the case and prayed judgment " that the cloud upon her title be removed, that the mortgage to the defendant Douthit be marked satisfied, and that she may have such other and further relief as the nature of the circumstances of the case may require, and to the court shall seem wise and just."
Answers were filed by Moore, Douthit, Williams and Greer, and the last three asked for a sale of the land, the subject-matter of the action. It was sold in the fall of 1879, under a decretal order of Judge Fraser-for how much does not appear. The facts which gave rise to this controversy are stated in the opinion of this court.
The decree of the Circuit judge, omitting its statement, was as follows:
Assuming that Moore had the right to give the mortgage in question to the Probate judge, and that the latter had the right to take the same as a valid and legal security (for without such assumption there is no case presented here), the question for consideration and determination now may be thus stated: Has the plaintiff here paramount right to be paid that portion of her debt for money advanced to Moore after the execution of the mortgage to the Probate judge; or is she to be limited to the sum with interest, which was advanced by Dr. Lake for Moore, with a claim as to the balance subordinate to the rights of the mortgagee? There is not enough to satisfy both.
The case was argued by the plaintiff's counsel as one of tacking, but I have no hesitation in saying that that iniquitous doctrine does not prevail in this State or in this country, where, in the language of Chancellor Kent, " by the operation of the registration laws, it has been torn up by the roots." If, therefore, the plaintiff is entitled to the whole of her demand, her right to it must rest upon other ground than this.
It cannot be denied that if the mortgage were out of the way, and Moore were here asserting his right to specific performance, he would be required to do equity by paying up the whole amount due by him before the court would enforce such right. Did his mortgage to the Probate judge convey anything except the right which he had to have the contract with Dr. Lake specifically performed? That was all the interest that he had in the subject-matter, and it was all he could transfer to another.
Assuming that Moore had a mortgageable interest in the lot, (see Witte v. Wolfe , 16 S. C. 256,) it must follow that the recording of such mortgage would be all that the law requires to affect any one who afterwards should take a mortgage of the same estate. But it by no means follows that the plaintiff here, who already had the legal estate, can be affected by such notice. This the law calls constructive notice, and it differs very essentially from that other kind of notice which gives actual knowledge and thereby affects the conscience. This actual knowledge the plaintiff, it appears, did not have, and in the absence of it, in good faith relying upon the legal title, she should be protected and secured. Nor was she bound to look down the line from the point of her legal title for subsequent incumbrances. Nothing short of actual knowledge of such could affect her-constructive notice was not sufficient. See National Bank of Chester v. Gunhouse , 17 S. C. 489.
This position derives valuable support from the analogous and well established principle of a release of his lien upon a portion of the premises by a senior mortgagee with actual knowledge of the existence of a second mortgage upon the premises. In such case the senior mortgagee must abate a proportionate part of his debt. But the mere record of such second mortgage does not affect the first mortgagee. See Jones Mort. , § 562. " It would not be reasonable to subject the mortgagee to the constant necessity of investigating transactions between the mortgagor and third persons subsequent to the mortgage." Continuing, the same author says: Ibid. , § 723. And this is the case of mortgages pure and simple. Surely the holder of the legal title, as in the case at bar, could not be placed in worse condition.
It is true, as contended for by the defendants, that Dr. Lake's title from Dr. Furman, although absolute in its terms, must be construed to be only a mortgage in fact. But it must be construed by the court to be so, for in its terms it is not a mortgage, but an absolute deed, and in putting upon it the construction demanded, the court would be derelict in duty if it failed or refused to take into consideration all the facts and circumstances of the case; and conspicuous amongst these are (1) the security which ought always to attach to the possession of the legal title; (2) the further loans of money upon the faith of it, and (3) the ignorance of the actual existence of the intervening mortgage to the Probate judge.
Wherefore it is ordered and adjudged and decreed, that the plaintiff, Mary P. Lake, is entitled to have judgment in full of her demands against the defendant, James P. Moore, as ascertained and set down by the master in his report, from the proceeds of the sale of the lot in question.
Let the plaintiff have judgment against the defendants for her costs and disbursements.
From this decree the defendants appealed upon the following exceptions (omitting the first, which is immaterial):
2. " Because the Circuit judge erred in holding that the plaintiff was entitled to the full amount of the $4,000 note, the master having found that there was no agreement between the late J. P. Moore and Mrs. Lake, when the $1,300 was loaned him by her as guardian, that the house and lot should stand as security for that amount in addition to the other note. The decree should have been for the amount due on the $2,200 note, then for the amount due the defendant Douthit and then for the $1,300 note to plaintiff.
3. " Because the Circuit judge erred in holding that the plaintiff, Mrs. Lake, was not affected with notice by the recording of the mortgage from J. P. Moore to the defendant Douthit, Probate judge.
4. " Because the Circuit judge erred in holding that the defendant Douthit occupied the same position that J. P. Moore did, by the taking of the mortgage, and that before he could have had a specific performance from Dr. Lake, he (Douthit) would have been required to pay off both of these notes.
5. " Because the Circuit judge erred in decreeing that the plaintiff was entitled to the whole amount due on the two notes, when it appears from the testimony that the mortgage executed to Douthit was before the second loan was made, which second loan was by her in a different right, to wit: as guardian of her minor son, T. E. Lake.
6. " Because the defendant, Moore, being in possession of the house and lot in question, exercising acts of ownership over the same, paying no rents and paying the taxes on the same, which facts being well known to the plaintiff and being sufficient in law to put her on the inquiry, she is estopped from disclaiming actual knowledge of the Douthit mortgage, or other equities prior to the second loan. The Circuit judge erred in holding that...
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